Defending the Producers: Examining Product Liability Protection for Compelled Manufacturing Under the Defense Production Act.

• Author: Greenspoon, Lauren R.

Lauren R. Greenspoon is a senior counsel and Ryan D. Class is an associate at Carlton Fields resident in the Hartford, Connecticut office. They both practice in the area of mass torts and product liability. Ryan also practices in the area of construction litigation.

IN MARCH 2020, the United States began to feel acutely the effects of a global outbreak of COVID-19, a potentially-deadly respiratory illness caused by the novel coronavirus SARS-CoV-2. (1) As illness and fatality totals steadily grew and hospitals faced the possibility of being overwhelmed by patients sick with COVID-19, state governments and the federal government took action to respond to the emerging pandemic. (2) On March 13, 2020, President Donald Trump declared the COVID-19 pandemic to be a national emergency pursuant to Section 501 (b) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act ("Stafford Act"). (3 )While this emergency declaration permitted the federal government to assist states, financially and otherwise, in their recovery efforts and federal agencies to coordinate the response to the crisis, (4) concerns loomed about shortages of needed medical equipment--particularly medical ventilators (5) and protective face masks. (6)

On March 18, 2020, President Trump issued an executive order invoking the Defense Production Act ("DPA"), (7) a Korean War-era law that provides the president with broad authority to direct production activity in the United States in order to further the "national defense." (8) On March 27, the president used his authority under the DPA to compel General Motors, an automaker, to produce ventilators amid a national shortage of these devices. (9 )President Trump subsequently invoked the DPA to steer the production of medical devices and/or protective equipment for health care workers by companies more traditionally associated with the manufacture of these goods, including General Electric, Medtronic, and 3M. (10)

Perhaps anticipating the product liability issues that could arise in the context of this compelled production, Secretary of Health and Human Services Alex Azar issued a separate declaration under the Public Readiness and Emergency Preparedness ("PREP") Act (11) in the days preceding the president's invocation of the DPA. This declaration immunized manufacturers of a broadly defined set of "covered countermeasures" against tort liability relating to the use of these countermeasures and preempted any contrary state law. The secretary defined these countermeasures as including "any . . . device . . . used to treat, diagnose, cure, prevent, or mitigate COVID-19, or the transmission of SARS-CoV-2 or a virus mutating therefrom, or any device used in the administration of any such product, and all components and constituent materials of any such product." (12 )This declaration likely encompasses the entire use cycle of a covered countermeasure, including its manufacture, and thus would (with certain limitations for cases of willful misconduct) shield manufacturers from liability arising from the manufacture of covered countermeasures in response to the COVID-19 outbreak. (13)

Although the secretary's declaration under the PREP Act presents a useful liability shield for compelled manufacturing activity under the DPA in response to COVID-19, the current invocation of the DPA raises serious questions about the need for more permanent protection against product liability suits for DPA-compelled manufacturing going forward. The PREP Act is both limited in its applicability--applying only in cases of "a disease or other health condition or other threat to health [that] constitutes a public health emergency" or a credible risk of such disease (14)--and is subject to the secretary of Health and Human Services' discretion both in its invocation and its scope. (15) The DPA's codified liability protection, (16 )meanwhile, has never been explicitly held to shield manufacturers from tort liability. (17)

In this article, we will argue that, contrary to some interpretations, the DPA's codified liability protection should be interpreted to shield compelled manufacturers against product liability claims. Instances of compelled production should be shielded from product liability claims under the doctrine of Yearsley immunity as well as the closely related "government contractor defense" provided certain conditions are met. We will first examine the origins of the DPA and its use before the COVID-19 pandemic. We then will examine the language of the DPA's codified liability protections, as well as relevant case law analyzing these protections. After that, we will look to two judicially created doctrines, Yearsley immunity and the government contractor defense, as well as the specific application of contractor immunity in the context of disaster relief efforts. In closing, we will argue that each of these defenses--direct immunity under Section 707 of the DPA, in addition to immunity under Yearsley and its progeny as well as the government contractor defense--offers a potential avenue to avoid liability based on compelled production. Finally, we will offer suggested practice pointers for manufacturers to ensure that manufacturers do not foreclose the availability of these defenses to themselves and properly assert these defenses in any potential litigation.

1. Background

   The federal government enacted the DPA in September 1950, spurred by the outbreak of the Korean War. (18) The purpose of the DPA, as set forth in Congress' declaration of policy, was to empower the president "to promote the national defense, by meeting, promptly and effectively, the requirements of military programs in support of . . . national security . . . and by preventing undue strains and dislocations upon wages, prices, and production or distribution of materials for civilian use . . . ." (19) The focus of the DPA remains on promoting national defense, although Congress expanded the definition of this term to encompass both traditional military aims and ones more closely implicating the United States' civilian population, specifically: "programs for military and energy production or construction, military or critical infrastructure assistance to any foreign nation, homeland security, stockpiling, space, and any directly related activity. Such term includes emergency preparedness activities conducted pursuant to title VI of [the Stafford Act] and critical infrastructure protection and restoration." (20) Executive Orders delegate the president's authority for implementing the DPA to pertinent cabinet secretaries, with the secretary of Health and Human Services responsible for the administration of the DPA as it pertains to "health resources." (21) In his order invoking the DPA to battle COVID-19, President Trump reemphasized his delegation of his authority to execute the DPA to the secretary of Health and Human Services. (22)

   Under the DPA, the executive branch has a wide-ranging set of powers vis-a-vis private sector manufacturers, including (1) the ability to prioritize the fulfillment of certain government contracts; (2) the ability to provide financial incentives, such as loans, to facilitate production; and (3) the ability to intercede in corporate decision-making, for instance by blocking certain mergers and acquisitions. (23) The first set of powers in this list, permitting the president both to prioritize private manufacturers' fulfillment of certain government contract orders over the fulfillment of nongovernment orders and also to direct the allocation of "materials, services, and facilities" (24) in service of the national defense, is most relevant to the present COVID-19 outbreak and is found in Section 101 (a) of Title I of the DPA. (25) To invoke these powers "to control the general distribution of any material in the civilian market," the president must find "(1) that such material is a scarce and critical material essential to the national defense, and (2) that the requirements of the national defense for such material cannot otherwise be met without creating a significant dislocation of the normal distribution of such material in the civilian market to such a degree as to create appreciable hardship." (26)

   Although the aforementioned language, as well as the DPA's wartime inception, would suggest that its use is limited to periods of dire national emergency or wartime mobilization, successive presidential administrations continuously have invoked the DPA in the military procurement realm. (27) According to a report by the Federal Emergency Management Agency, the Department of Defense has used the DPA's prioritization authority "continuously and extensively" since 1950, placing approximately 300,000 prioritized orders per year. (28) Presidents of both parties also have used the DPA outside the military context, with former Presidents Bill Clinton and George W. Bush each invoking the DPA in early 2001 to ensure the transmission of electrical power and natural gas to the state of California in the midst of that state's energy crisis. (29) Former President Barack Obama used the DPA to force American telecommunications companies to disclose information on their use of foreign-manufactured components in an effort to root out potential cyberespionage, (30) while President Trump invoked the DPA in 2017 to promote the production of various materials deemed important to the "space industrial base." (31) The DPA's allocation authority, meanwhile, has gone unused since the end of the Cold War, although certain civilian aircraft remain allocated under it for purposes of the Civil Reserve Air Fleet. (32)

2. Potential Avenues for Liability Protection

   The president's ability not only to prioritize the fulfillment of government contracts but also to compel the production of needed goods raises important liability questions...